The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans
Published: 04/15/2016 | DOI: 10.1111/jofi.12411
VERONIKA K. POOL, CLEMENS SIALM, IRINA STEFANESCU
This paper investigates whether mutual fund families acting as service providers in 401(k) plans display favoritism toward their own affiliated funds. Using a hand‐collected data set on the menu of investment options offered to plan participants, we show that fund deletions and additions are less sensitive to prior performance for affiliated than unaffiliated funds. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, we find that the subsequent performance of poorly performing affiliated funds indicates that this favoritism is not information driven.
Do Hedge Fund Managers Misreport Returns? Evidence from the Pooled Distribution
Published: 09/28/2009 | DOI: 10.1111/j.1540-6261.2009.01500.x
NICOLAS P.B. BOLLEN, VERONIKA K. POOL
We find a significant discontinuity in the pooled distribution of monthly hedge fund returns: The number of small gains far exceeds the number of small losses. The discontinuity is present in live and defunct funds, and funds of all ages, suggesting that it is not caused by database biases. The discontinuity is absent in the 3 months culminating in an audit, suggesting it is not attributable to skillful loss avoidance. The discontinuity disappears when using bimonthly returns, indicating a reversal in fund performance following small gains. This result suggests that the discontinuity is caused at least in part by temporarily overstated returns.
The People in Your Neighborhood: Social Interactions and Mutual Fund Portfolios
Published: 09/02/2014 | DOI: 10.1111/jofi.12208
VERONIKA K. POOL, NOAH STOFFMAN, SCOTT E. YONKER
We find that socially connected fund managers have more similar holdings and trades. The overlap of funds whose managers reside in the same neighborhood is considerably higher than that of funds whose managers live in the same city but in different neighborhoods. These effects are larger when managers share a similar ethnic background, and are not explained by preferences. Valuable information is transmitted through these peer networks: a long‐short strategy composed of stocks purchased minus sold by neighboring managers delivers positive risk‐adjusted returns. Unlike prior empirical work, our tests disentangle the effects of social interactions from community effects.
Conflicting Family Values in Mutual Fund Families
Published: 12/27/2012 | DOI: 10.1111/j.1540-6261.2012.01797.x
UTPAL BHATTACHARYA, JUNG H. LEE, VERONIKA K. POOL
We analyze the investment behavior of affiliated funds of mutual funds (AFoMFs), which are mutual funds that can only invest in other funds in the family, and are offered by most large families. Though never mentioned in any prospectus, we discover that AFoMFs provide an insurance pool against temporary liquidity shocks to other funds in the family. We show that, though the family benefits because funds can avoid fire sales, the cost of this insurance is borne by the investors in the AFoMFs. The paper thus uncovers some of the hidden complexities of fiduciary responsibility in mutual fund families.